Gevo (GEVO) Predictability Rank

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What is Gevo Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

Gevo Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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Gevo (GEVO) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Chemicals » Gevo Inc (NAS:GEVO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

GEVO:Mexico ZGV3:Germany

Address

345 Inverness Drive South, Building C, Suite 310, Englewood, CO, USA, 80112

Website

https://www.gevo.com

Gevo Inc is a renewable chemicals and biofuels company engaged in the development and commercialization of alternatives to petroleum-based products based on isobutanol produced from renewable feedstocks. Its operating segments are the Gevo segment, Renewable Natural Gas Segment, Net-Zero Segment and the Agri-Energy segment. By its segments, it is involved in research and development activities related to the future production of isobutanol, including the development of its biocatalysts, the production and sale of biojet fuel. Gevo Development/Agri-Energy is the key revenue-generating segment that involves the operation of the Luverne Facility and production of ethanol, isobutanol and related products.

Executives

Andrew Shafer	officer: Chief Mktg Cust & Brnd Officer	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Alisher K Nurmat	officer: VP and Controller	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Angelo Amorelli	director	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Paul D Bloom	officer: CCO & CIO	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Kimberly T Bowron	officer: Chief People Officer	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Andrew Marsh	director	968 ALBANY SHAKER ROAD, LATHAM NY 12110
Patrick R. Gruber	director, officer: CEO & Director	C/O GEVO, INC., 345 INVERNESS DR. SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Christopher Michael Ryan	officer: EVP, Business Development	C/O GEVO, INC., 345 INVERNESS DR. SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Timothy J Cesarek	officer: Chief Commercial Officer	345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
L Lynn Smull	officer: Chief Financial Officer	345 INVERNESS DRIVE S, BLDG C, STE 310, ENGLEWOOD CO 80112
William H Baum	director	C/O DIVERSA CORP, 4955 DIRECTORS PLACE, SAN DIEGO CA 92121
Williams Geoffrey Thomas Jr.	officer: General Counsel & Secretary	914 DAKOTA DRIVE, CASTLE ROCK CO 80108
Jaime Guillen	director	C/O GEVO, INC. 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112
Carol Jane Battershell	director	1600 NORTH OAK STREET, #918, ARLINGTON VA 22209
Gary W. Mize	director	GEVO, INC., 345 INVERNESS DRIVE SOUTH, BUILDING C, SUITE 310, ENGLEWOOD CO 80112